Permanent losses from historic impasse

The longest federal government shutdown in U.S. history has ended, but not without leaving a mark on an already-struggling economy.

- CHRISTOPHER RUGABER

THE U.S. SHUTDOWN is expected to cause about $11 billion in economic losses.

(J. Scott Applewhite Associated Press)

About 1.25 million federal workers haven't been paid since Oct. 1.

Thousands of flights were canceled as Congress moved toward reopening the government.

Government contract awards have slowed and some food aid recipients have seen their benefits interrupted.

Most of the lost economic activity will be recovered as the government reopens, as federal workers will receive back pay.

But some canceled flights won’t be retaken, missed restaurant meals won't be made up, and some postponed purchases will end up not happening at all.

“Short-lived shutdowns are usually invisible in the data, but this one will leave a lasting mark, both because of its record length and the growing disruptions to welfare programs and travel,” said Gregory Daco, chief economist at accounting giant EY.

The Congressional Budget Office estimated that a six-week shutdown will reduce growth in this year’s fourth quarter by about 1.5 percentage points.

That would cut growth by half from the third quarter. The reopening should boost first-quarter growth next year by 2.2 percentage points, the CBO projected, but about $11 billion in economic activity will be permanently lost.

The previous longest government shutdown, in 2018-19, lasted 35 days but only partially shut the government because many agencies had been fully funded. It only nicked the economy by about 0.02% of GDP, the CBO said then.

The shutdown has added to the economy’s existing challenges, which include sluggish hiring, stubbornly elevated inflation, and President Trump’s tariffs, which have caused uncertainty for many businesses. Still, few economists foresee a recession.